Why Has State Farm Stopped Paying Appraisal Awards?

State Farm has a new claims process involving appraisal. The problem for many policyholders is that it is often resulting in payment for amounts less than the appraisal panel decided—sometimes, nothing is paid.

How does it work? State Farm has a new appraisal section that reviews appraisal awards from weather events. It consists of four units with approximately eight adjusters per unit and one manager for each unit. One unit oversees appraisals in Florida. One unit oversees appraisals in Texas. The other two units oversee appraisals from the rest of the 48 states.

We have written and analyzed State Farm’s new appraisal language in State Farm New Policy Filing In California Should Be Concerning To All In the Property Insurance Industry—An Example Is the New Appraisal Language, and New Requirements for Being a Property Insurance Appraiser—Are Insurers Going to Change Appraisal With New Policy Language? What we did not explore was the change in operation guidelines and processes which State Farm has implemented to reduce the claims severity of losses resolved through the appraisal process.

So, my current plan, quoting from Ringo Starr, is to ask for a little help from all of my friends. Do you have an example or case where State Farm has reneged on paying the appraisal panel’s award? Will you share it with me? We want to organize efforts and share information to find out why these appraisals are not being paid and to make certain that this new State Farm process is totally in good faith and reflects State Farm’s “Good Neighbor” promise. Heck, we invite the State Farm officials in Bloomington reading this blog to provide information about how all this works to help quicken our investigation.

An example of how this new process did not work is from a recent trial that Daily & Black won against State Farm in Texas. Here are the facts of the case:

This case arises from a dispute between Dr. Winston and his homeowner’s insurance carrier, State Farm. In April 2019, Dr. Winston filed a claim with State Farm for hailstorm damage to his home. State Farm paid Dr. Winston based on its inspector’s assessment of the damage. Dr. Winston was dissatisfied with the payment because the parties disagree about the extent of the damage—specifically, Dr. Winston contends that his roof needs to be replaced, while State Farm believes it could be repaired. When the parties reached an impasse, Dr. Winston invoked an appraisal clause in the parties’ contract to determine the actual amount of loss. The appraisal was conducted in October 2019, finding that $91,138.71 was necessary to replace the roof. State Farm continued to maintain that the roof did not need to be replaced. As such, State Farm reduced the appraisal award by $91,138.71 and paid Dr. Winston the amount it estimated was necessary to repair the roof, plus some additional funds for other damages to the home. All told, State Farm paid Dr. Winston $28,193.74 for hail damage. At issue in the case was whether State Farm breached the parties’ contract by refusing to pay $91,138.71 to replace Dr. Winston’s roof. The case went to trial and a jury found that State Farm had breached the contract. The jury awarded Dr. Winston $77,896.71, which is the $91,138.71 appraised amount to replace the roof minus Dr. Winston’s $13,242.00 deductible.¹

In addition to the amount owed under the contract, the judge had to determine the amount of interest owed and the attorneys fees. The judge ruled that the interest added $28,253. Then, the judge awarded attorneys fees of $112,338.60.

State Farm paid more in interest and attorneys fees than what it withheld from its policyholder. The problem is that in many states, no prompt payment statutes exist, and no awards of attorneys fees are granted. This case should be example one for the reason policyholders in every state need pro-policyholder legislation because who would pay an attorney for more than what the claim is worth? Why shouldn’t insurance companies not pay high-interest penalties for making money on the float of monies they owe, after being told not once but twice that they did not pay enough?

So, to all my public adjuster, restoration contractor, roofer, and policyholder attorney friends, will you share some information and results from State Farm appraisals so we can learn more about State Farm’s new appraisal process?

Appraisal is supposed to be a quick and less costly means of resolution. However, when you have to pay your own appraiser, half the umpire’s fee, and then litigate to get what is owed, policyholders are being ripped off.

By sharing information about how one of the leading insurance companies treats its customers after a dispute about the amount of the loss occurs, we can take this same information as evidence of the need for stronger pro-policyholder laws.

Thought For The Day

I feel the older I get, the more I’m learning to handle life. Being on this quest for a long time, it’s all about finding yourself.
—Ringo Starr
___________________________________________________
¹ Winston v. State Farm Lloyds, No. SA-20-CV-00515 (W.D. Tex. Aug. 11, 2022).